Trade, Debt, Territorial Issues Dominate US-China Talks

Washington and Beijing are entwined economically and diplomatically. Yet their relationship is often strained by economic and territorial issues.

U.S. National Economic Council Director Larry Summers and Deputy National Security Adviser Thomas Donilon are in Beijing to discuss ways to ease some of the friction. The two advisers to President Obama will hold a series of talks over the next two days with Chinese officials.

Ahead of the talks, the Chinese government's Organization Department chief Li Yuanchao put a positive spin on relations. China and the U.S. have maintained what he describes as stable development, said Li.

Despite recent upsets, meetings between President Barack Obama and Chinese President Hu Jintao - who met earlier this year - have put relations between the two countries on what he describes as a "sound track".

Washington has long been frustrated with what it sees as a one-way street in trade, a relationship in which China's exports to the U.S. dwarf U.S. goods sold to China. The imbalance continues to grow with forecasters saying the U.S. trade deficit with China could total $249 billion this year.

American businesses and politicians have long complained that China keeps its currency undervalued to give its manufacturers an unfair advantage by making Chinese exports cheaper.

China is the world's biggest holder of U.S. government debt and Beijing officials fear the worth of these holdings could be eroded by the global financial crisis.

The U.S. and China also have differences on territorial issues, including Beijing's claims to the South China Sea.